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Investors who want to cash in on The Bank of Nova Scotia's (TSE:BNS) upcoming dividend of CA$0.87 per share have only 4 days left to buy the shares before its ex-dividend date, 01 April 2019, in time for dividends payable on the 26 April 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Bank of Nova Scotia's latest financial data to analyse its dividend characteristics.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Bank of Nova Scotia pass our checks?
The company currently pays out 50% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. BNS has increased its DPS from CA$1.96 to CA$3.48 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Bank of Nova Scotia produces a yield of 4.9%, which is high for Banks stocks but still below the market's top dividend payers.
Taking into account the dividend metrics, Bank of Nova Scotia ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for BNS’s future growth? Take a look at our free research report of analyst consensus for BNS’s outlook.
- Valuation: What is BNS worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BNS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.